Budget: More taxes will be needed, says KPMG

Andrew Smith, KPMG Chief Economist said:

“The Budget projections look like a triumph of hope over experience. Despite having to drastically downgrade his forecast for growth this year, the Chancellor still expects the economy to rebound over the next two years.

“Even though Mr Darling insists that the end of the recession is in sight, we are still looking at eye-watering budget deficits and a doubling of public debt. And if the Chancellor’s growth forecasts again prove over-optimistic, the public finances will turn out even worse.

“The plans for repairing the public finances are long on ambition but short on detail. Cutting public spending has proved difficult in the past and without more detail the plan this time may be regarded as little more than an aspiration.

“If history is anything to go by, significant additional tax hikes will ultimately be necessary as well.

“In trying to combine support for the economy with reassurances that the public finances will be brought under control, the Chancellor risks falling between two stools. If he hasn’t done enough to end the recession, the plans for improving the public finances will unravel as well.”